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You missed the most critical points of the parent though. To use your example, Comcast has been overcharging by $10/month for years.

A just resolution would be for each customer to get $120/year they were with Comcast PLUS Comcast should have some penalty for their fraud.

Instead what happens is Comcast agrees to a "huge" $30 million fine that works out to $12/customer per year if everyone opts in to the lawsuit and the lawyers take 50% for their efforts, so the lawyers get $15 million, the customers who sign up get $12 back and the ones who miss the memo get $0.

The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered".

A just system would make the corporation pay the lawyer fees (as part of their punishment for doing illegal things) and the customers/victims would be made 100% whole.

You actually can remove yourself from a class action and retain the right to sue independently, if you think you will do better and win your 100%. (Or for any other reason)

For purposes of clarity, lawyers don't get 50%, and whatever they do get needs to be approved by the judge. It's often 20-30% depending on work.

> The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it"

They definitely do, they can decide to opt-out, and retain the right to sue the company on that issue. But those who opt-out would have to go start their own lawsuit. For small matters where you were wronged by $120, and you only get $30 back, this is definitely not worth it to start your own lawsuit, the best action here is to take the money and boycott that company if possible. For bigger amounts, like lemon-law cars, it might be worth it, especially if the payouts look too small. For instance, $300 refund if you had to do multiple transmissions repair on your car doesn't seem that great, given that a transmission repair can cost from $500 to thousands of $ each. In that case it can make sense to opt-out.

> or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered".

The article says they usually get $2 for $10, which can still look high I agree, but definitely not 50%.

"Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them."

Actually, you are misunderstanding the purpose of class actions. You may see it as s some ideal, but it's not why they were created. They were created to simplify similar cases into one case for the purpose of not having two trials when you could have one.. That's it. It was literally for the efficient administration of justice. Not to do what you suggest the purpose is. Take a gander at the history of the federal rules of civil procedure, this is very widely documented and known.

This is one reason the supreme court was able to say "no more". They are just a collection of court rules.

I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals.

>I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals.

I can't say whether or not the process is ideal, but I can say that the benefit to individuals is irrelevant. The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred. The bar for success can't always be directed at individuals; there are very positive societal level benefits that are small to individuals but huge to the whole ecosystem.

"but I can say that the benefit to individuals is irrelevant. "

Again, never the original purpose, and while a good goal, class actions are surely ineffective at this.

" The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred."

Also as mentioned, I think this is very true, but class actions have pretty much not had that effect at all. There are very few areas where class actions have been effective at accomplishing this.

How does that work, then? If I sue a company and then N other people separately sue the company for the same reason, then the courts turn it into a class-action? That doesn't seem just. The parent's perspective seems to make more logical sense. That is, the only reason why I'd want to participate in a class-action was if the damages were so low that it wouldn't be worth the effort to sue separately. If I had high damages, I'd be upset if someone transformed my case into a class action.

"How does that work, then? If I sue a company and then N other people separately sue the company for the same reason, then the courts turn it into a class-action? That doesn't seem just. "

Yes.

Second, just in in what sense? If the questions affecting everyone are the same, there's no point in having 5 trials about it.

"(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if: .. (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. "

I believe one of the terms you're looking for is "judicial economy."

How about a citation instead of the somewhat snarky suggestion to "take a gander at the history of the federal rules"? I am not an expert here, but Wikipedia suggests that the history of grouping similar cases for efficient resolution by the courts is not actually the basis for the modern American class action--it was pushed by those who thought it would be a good vehicle for new cases that wouldn't have been viable previously (as the GP suggested):

The Advisory Committee that drafted the new Rule 23 in the mid-1960s was influenced by two major developments. First was the suggestion of Harry Kalven, Jr. and Maurice Rosenfield in 1941 that class action litigation by individual shareholders on behalf of all shareholders of a company could effectively supplement direct government regulation of securities markets and other similar markets. The second development was the rise of the civil rights movement, environmentalism and consumerism. The groups behind these movements, as well as many others in the 1960s, 1970s and 1980s, all turned to class actions as a means for achieving their goals.

https://en.wikipedia.org/wiki/Class_action

Also, it's somewhat misleading to cite to the history of the class action and ignore current justifications. This is like arguing that U.S. democracy is bad because it was originally a method for a small group of wealthy landowners to control the country, while ignoring the fact that currently anyone can vote. The history of class actions in England, although interesting, does not make the GP comment incorrect. If the modern purpose is only to simplify similar cases, we already have coordination and consolidation.

> Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.

If you think of litigation in economic-theoretic terms, yes, that's the purpose of class actions. But while you're in that head space, you also need to consider the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble.... Where the claims are small and the class members are unsophisticated, the principals (the consumers) don't have sufficient incentive to control their agents (the lawyers).

That manifests in class action litigation in two ways. Class action lawyers are incentivized to bring cases that are marginal on the merits: http://www.abajournal.com/news/article/posner_opinion_blasts.... They also are incentivized to settle good cases for for a fraction of potential damages.

The end result is a system that doesn't do a great job of really anything. Consumers get only a tiny fraction of what they've lost. Companies aren't deterred--they just treat the occasional payout as the cost of doing business.

Is this related to the transactional principal-agent problem in things like real estate, where the incentives of the agents are to close transactions as quickly as possible, since optimizing for the quantity of transactions handled is wildly more lucrative than optimizing for the outcome of any one transaction?

Yes, I think so. There is at least a significant subset of the industry where the most lucrative strategy is settling a large volume of mediocre cases quickly.

It's more a manifestation of thst problem than merely related.

Class action lawsuits are a crappy solution, but often better than the alternative, which is often nothing.

(In some cases, mass direct-action lawsuits are superior, but coordinating those also has substantially increased overhead, and they gave some of the same settlement incentives; OTOH, because they are positive approval rather than opt out, it's less likely that a small-fraction settlement gets approved.

The alternative is regulatory agencies with teeth, as you see in the EU. 'Doing nothing' is a false dichotomy unless you subscribe to libertarian/corporatist philosophy. (Which would, if it could, abolish the position of the attorney general.)

> The alternative is regulatory agencies with teeth, as you see in the EU.

I was referring to the alternatives available in the status quo legal system in the US, but I disagree that more powerful regulatory agencies are a complete replacement for class actions, though they are perhaps independently desirable.

> 'Doing nothing' is a false dichotomy unless you subscribe to libertarian/corporatist philosophy. (Which would, if it could, abolish the position of the attorney general.)

No, it wouldn't (at least, most libertarians and even more so pro-corporate types recognize a role for government and a role for AGs within that government, though a narrower role than the status quo for each.) It might eliminate state causes of action on behalf of consumers, but those aren't the whole (or even main) thing that AGs, who are the state or federal government's chief legal counsel and law enforcement officer, do.

(Also, you seem to be missing “corporatist” to mean “pro-corporation minarchist capitalist”; corporatism is a disinct politico-economic philosophy that is about as far from libertarianism/minarchism as possible.)

I don't meant to conflate corporatists with libertarians - just that they tend to come to the same conclusion on these issues.

And looking at the American political landscape, there are far more dyed-in-the-wool anti-human corporatists holding power then there are libertarians.

I think you're making a "perfect is the enemy of good" mistake. Yes, the class action mechanism has its flaws and is open to abuse. But you're trying to imply that ALL class actions are like the one in the linked article, which is not the case, and it's not exactly honest to paint all or most class actions as being like the one in your link. Or even that the problems of incentives invalidates any use of class actions.

Not to mention that the article offers data to refute this idea that only the lawyers benfit (from a study the author commissioned in 2010 while at the Consumer Financial Protection Bureau):

>Opponents also claim that the rule benefits lawyers rather than consumers. In reality, lawyers collect a small portion compared with consumers, and only if they succeed. For every $10 that a company pays out for wrongdoing, we found about $8 goes to consumers and $2 goes to pay legal costs. In any event, banks choose to hire lawyers to file class-action lawsuits, and ordinary people deserve to make the same choice.

>Consumers get only a tiny fraction of what they've lost.

But the whole point is that consumers have, individually, lost very little. If you were overcharged $20 and got $10, or $5, the company in aggregate has still been forced to pay out a lot. Any individual consumer isn't going to receive significant compensation even in a 100% win.

The article again offers data to refute this idea that consumers don't get fair compensation through class actions:

>First, opponents claim that plaintiffs are better served by acting individually than by joining a group lawsuit. This claim is not supported by facts or common sense. Our study contained revealing data on the results of group lawsuits and individual actions. We found that group lawsuits get more money back to more people. In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total.

>Companies aren't deterred--they just treat the occasional payout as the cost of doing business.

This is true of any litigation, yet we don't usually see arguments against the very concept. It still at least forces companies to consider one more bar to abuse.

Until we have better regulation, this imperfect tool is something consumers have available to them to fight abuses of a type that normally wouldn't be addressed because of their nature. Without this tool, consumers would have no recourse. As the article says:

>As one judge noted, “only a lunatic or a fanatic sues for $30.”

>When a bank charges illegal fees to millions of customers and then blocks them from suing together, a result is not millions of individual claims, but zero. So the bank gets to pocket millions in ill-gotten gains.

Arguing against class actions makes no sense until we do have legislative or regulatory alternatives.

Everyone in my family growing up was a lawyer, and the saying I always heard was "in class action lawsuits only the lawyers are getting rich". I've also heard this from many other lawyers outside my family. So it's at least a widely held belief.

But that's the point: what does that comment mean? Class actions, like any court action, isn't meant to make the plaintiffs rich. It's to obtain restitution for their harm. If they were ripped off $10, then they should get something around that. The lawyers who got them that compensation should of course be paid for their work.

Right, but if we take his statement at face value, and a significant portion of the money changing hands in a class action is going towards lawyers, it's at the very least a massively inefficient system.

Good question. Lets take lawyers a side.

How much would you pay to somebody to ensure that a big evil corporation is not cheating their ~10M customers by $10/year (100M/year in total)? $10M? $50M?

This is the perspective that makes sense to me. Regular Joe individuals may not be getting rich, or even getting decent compensation for the harm they experienced, but is society getting a benefit by having a process that disincentives large companies from harming millions of people in small ways for big profits? I'd say that yes, that is VERY valuable for society, and if a handful of lawyers are getting millions for it... so what?

This doesn't mean it's the ideal solution to widespread consumer harm, but it's a tool we have at our disposal NOW instead of hypothetical legislation or regulation we might have at some point in the future...

Well, in the article the author of the linked article points to a study he commissioned at the Consumer Financial Protection Bureau which found

>In reality, lawyers collect a small portion compared with consumers, and only if they succeed. For every $10 that a company pays out for wrongdoing, we found about $8 goes to consumers and $2 goes to pay legal costs.

Of course we could take issue with this study, but unless someone can present some evidence in its favor the notion that only the lawyers ever profit from class actions seems like received wisdom "everyone just knows".

That's a good thing. I means that lawyers have a great incentive to keep an eye out for illegal behavior from massive corporations.

I don't think you should assume Rayiner doesn't understand what a class action is. He's an appellate lawyer, I'm pretty sure he gets what a class action is.

He's basically saying class actions don't work the best if your goal is greater consumer protection. There are other ways to do it that are more effective.

I'm not assuming anything. I'm saying that he's misunderstanding the purpose and value of class actions based on the content of his comment, and am not impressed by attempts at arguments from authority. Appellate lawyer or not, his points were not good ones.

I mean, the very article he's commenting on directly refutes his points about class actions resulting in less compensation for consumers and only or largely benefiting lawyers.

It's not an argument from authority. It's an attempt to sidestep the breaking things down into basic parts for non-technical discussion, by pointing out that the person you responded to is capable of having a technical discussion on the subject.

You make some statements here that are arguable - for example, that 'class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.'

That's not always true. Legislation or regulatory oversight are often better solutions as they occur faster and have broader implications. You even acknowledge that later in your comment as you agree that regulation is better.

I don't think anybody in the thread is arguing that individual arbitration is a better method. The question is whether class-action suits is the final method or if we should be considering different regulatory controls.

Yes, I noted that regulation or legislation is better, but we don't have them now. Under the current system, class actions are valuable instruments for consumers.

No one, myself included, is saying class actions should be "the final method", just that it's wrong to argue against them when they are currently generally the only method available to consumers for certain kinds of harm. I'd be the first to support robust regulatory protections that protect consumers to the point that they render class actions redundant, but sadly we don't live in that world.

You don't live in that country. Many other countries do indeed have much stronger consumer protections. Regulatory ministries in other nations often have nearly plenipotentiary authority in their area of regulation. Once your business is noted as doing something anti-social, you can expect increasing interest from them, and they have full authority to just inspect the books and premises of your business and see what you're up to, and decide how they want to react to it.

Class actions are a poor substitute for good regulation. They are the bare minimum, or somewhat less than the bare minimum.

Personally I don't like that regulatory oversight is being outsourced to lawsuits both class action and from regulators. One might say that if Comcast were overcharging their customers they were defrauding them. And while I am generally in favor of weaker regulations I am in favor of much stronger penalties for those that break the law. In your example not only should Comcast be disgorging any fraudulently obtained gains with interest, people should be going to jail. We have as a country for too long accepted this system where when a company does something illegal we let those that committed the fraud off the hook and send the bill to the companies shareholders. The idea that HSBC should have been allowed to continue to operate in the US after its conduct is absurd, (and yes I understand what would have happened if their banking license was pulled). That there have not been large numbers of arrests of Wells Fargo employees given the amount of fraud committed and laws broken is also absurd. If you or I fraudulently opened millions of accounts we would rightly be going to prison for a very long time.

I do find it gratifying to see VW employees being indicted. But the arrest of executives who commit wrongdoing is far too rare these days.

Written like a true class action plaintiffs' attorney.